NCPA - National Center for Policy Analysis

The Stock Market Will Go Up With Time

March 23, 2001

While some people are treating the stock market ups and downs like a roller coaster ride (with its attendant terror) other researchers are confident the market will improve in the next 12 months - 96.7 percent confident. That's because 96.7 percent of the time, stocks have done better than the current dismal market.

According to an Ibbotson Associates data base covering every 12-month period from March 1927 -- a sample of 888 one-year investment periods --

  • Stocks have provided positive returns in 75 percent of all 12-months periods.
  • But only 30 periods were worse than the 12-month return for the S&P 500 ending yesterday, which ranked 858th; most of the worse periods were in the Great Depression.
  • This also means stocks did better 96.7 percent of the time than the last 12 months, and similar figures apply for other investment periods -- a month, a quarter, six months or two years.

Of course, having a bad year doesn't mean the next one will be good, but if history establishes boundaries, it does suggest we're at an extreme. Therefore, it's highly improbable we'll continue to have trailing 12 month returns with losses over 25 percent.

Source: Scott Burns, "In Time of Market Terror, Statistics Can Be Calming," Dallas Morning News, March 23, 2001.


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